Captives, delicate market, ESG and AI dominate Amrae discussions

As this year’s risk and insurance management conferences kicked off in France, Amrae and its members were focused on several big issues, ranging from the anticipated boom in home-domiciled captives and the delicately balanced insurance market to the seemingly never-ending expansion of risk, ESG and AI.

Many of these issues will be near the top of the agenda for Commercia Risk Europe readers in France and beyond in 2024, which we will cover as we travel across Europe and bring you a series of newsletters from the big association events and related country-specific news.

The first of these follows the 31st Rencontres de l’AMRAE in Deauville, which once again attracted an impressive number of French risk and insurance managers to the Normandy coast.

One of the big recent developments in France is new rules that create more favourable conditions to set up captives in the country, which was a big topic of conversation in and around the Amrae conference. The association and experts from the insurance market predict a French-based captive boom in 2024.

Brokers and insurers say that a growing number of clients are looking at the possibility of setting up captives in France, backing up an estimate from Amrae that the number could double to 30 by the end of this year. One source even told us that at least one captive owner is working to relocate its existing Luxembourg-based captive to France, although experts are still unsure whether, or when, such a move makes much sense.

The popularity of captives is partly fuelled by the recent hard commercial insurance market. The good news is it seems that widespread hardening in France is over, with experts suggesting that rising competition will usher in a more benign, or even softer period, for good risks. But things are by no means easy for French firms, which face a two-paced market and shouldn’t expect things to turn completely in their favour, particularly when it comes to lowering deductibles. So those new captives will certainly come in useful.

Amrae president Oliver Wild has publicly urged insurers to boost dialogue to help tackle problem areas that persist, and French buyers say the insurance market remains reticent over certain risk. French risk managers that took part in this year’s Risk Frontiers Europe survey stressed that tensions can still surface when renewing some insurance programmes, and a number of risks that have been hard to sell in recent years remain uncovered.

One big area of concern is ESG, with Wild calling on carriers to make clear how they treat such risks and related risk management during underwriting. He, and others, complain that insurers are still not rewarding risk management and ESG efforts made by clients. Amrae’s president also urged insurers to engage in more dialogue with buyers to provide covers for sectors, such as renewable energies, that currently struggle to find protection.

He was backed up by the CEO of a French renewable energy company, who has asked the insurance market to provide more support for innovative technologies that will help trigger the energy transition. She told the Amrae conference that insurance prices are too high for her firm and it remains difficult to find cover for some risks. Meanwhile, Arnaud Bergauzy, head of risks and insurance in France at Lafarge, warned insurers that their future is at risk if they cannot adapt quickly to the ESG agenda.

The positive news is French risk managers are getting more and more involved in ESG risk management, according to participants in the French leg of our Risk Frontiers Europe survey, who back their profession to make further inroads.

In other news, cyber and business interruption remain the biggest risks facing French firms this year, according to experts polled for the latest Allianz Risk Barometer. This is the same top two risks as the global and European rankings. Fire and explosion, climate change, political risks and changing regulation have risen up the ranking among French firms. While the energy crisis and macroeconomic developments moved in the other direction and dropped down.

Supply chain issues, mounting as commercial ships come under attack by Houthi militants in the Red Sea, are causing problems for risks managers in France and across Europe. Leading French risk professionals told Commercial Risk Europe that they are setting aside extra time to find alternatives for logistics disruptions caused by wars, trade conflicts and other supply chain issues. But implementing solutions, such as re-localisation and diversification of suppliers or alternative shipping routes, can prove much harder than it sounds and these solutions are themselves creating additional risks, they warn.

And this task is made more complex because supply chain-related insurance covers, such as war and political risk protection, have become harder to arrange. Some companies are even forced to work without insurance protection in certain parts of the world.

One other big area of focus for French risk managers at the Amrae conference was, unsurprisingly, AI. It is rising up the corporate agenda and becoming a hotter topic in discussions we have, and events we host and attend. Many of the conversations focus on finding the right balance between risk and reward.

Risk managers from France say generative AI will create big opportunities for companies but also raises the prospect of aggravating some of the risks they face today. They are particularly worried about the prospect of facing new risks that are still not well understood, and consequently not covered by the insurance market.

Amrae board member Alain Ronot told those gathered in Deauville that instead of focusing on new risks created by AI, companies should consider how it intensifies other risks and the benefits it can bring. “AI is more of a driver of existing risks rather than a new risk,” he said. “And we increasingly see it as a source of opportunities, and not a risk.”